Flipkart Warns Of Serious Customer Disruption

Flipkart,
Walmart Inc.’s online retailer in India, has told the Indian
government that the company will be at risk of major customer
disruption in case the implementation of the new curbs for e-commerce
is not postponed for at least six months.

The
new curbs on India; foreign investments which are supposed to be
implemented by Feb 1, will prevent e-commerce companies from putting
products for sale from firms that have an equity interest in. The ban
will also prevent them from reaching into deals with sellers to offer
products on only one platform.

Kalyan
Krishnamurthy, Chief Executive of Flipkart, sent a letter to the
country’s Industries department stating that the new curbs will
require the company to asses all aspects of its business operations.
According to Krishnamurthy’s letter, redesigning the
different elements of the business to ensure that the company can
validate their compliance with the new rules will require significant
resources. The new curbs were put forth by the Indian government on
Dec 26th and are expected to be implemented by Feb 1. Krishnamurthy
also said in his letter that this would create major customer
disruptions as services are interrupted if the deadline date for
compliance is not extended by at least 6 months. The contents of the
letter sent by Krishnamurthy have not been reported previously. The
company declined to comment.

However,
it is unlikely that the government will make changes to the policy’s
implementation date according to Indian officials. A industries
department has declined to comment. The new policy move was a
jolt to Walmart, which made a huge investment of $16 billion in
Flipkart last year. Amazon had also committed $5.5 billion to its
Indian counterpart.

Sources
in the industry report state that the new policy will raise
compliance costs and also force Flipkart and Amazon to review their
business dealings in the country. Amazon and Flipkart have
already started approaching sellers on their platforms to make sure
that the companies comply with the new curbs, even though they are
seeking a deadline from the industries department. Flipkart
estimated that the process would take five to six months. The company
is focusing on working with sellers at present and has placed the
rest on the back burner for now.

Small
traders in India had complained about how e-commerce giants were
using their control over the inventory to make an unfair market place
by offering deep discounts. According to the new policy, such
arrangements will be banned.

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